Indian Prime Minister Modi reiterated: Do not buy gold unless absolutely necessary.

Modi once again publicly discouraged Indians from buying gold, causing jewelry stocks to fall.

On Tuesday, Modi posted on Instagram, "Even gold should not be bought unless absolutely necessary." He linked reducing gold consumption to promoting domestic products and strengthening self-reliance, stating that this is the only way for India to present itself as a "developed India" by the time of its centennial independence. This is the second time this year that he has made such a call— in May, he asked Indians to stop buying gold for at least a year .

Following the news, the Indian jewelry sector immediately declined. Titan Company fell 1.12% to 5045.50 rupees, while Kalyan Jewellers dropped even more, by 4.50% to 587 rupees.

Meanwhile, spot gold fell below $4,400 per ounce, trading at $4,399.45 per ounce, down more than 1% on the day.

Record import bills, foreign exchange pressure is the root cause.

The macroeconomic backdrop to Modi's statement is a continuously expanding bill for gold imports. India's gold imports reached $71.98 billion in fiscal year 2025-26, a 24% year-on-year increase and a record high. Prior to this, imports amounted to $58 billion in fiscal year 2024-25 and $45.54 billion in fiscal year 2023-24, nearly doubling in five years.

It is worth noting that the surge in import value was not driven by demand. In the same period, actual import volume declined by 4.76%, from 757.09 tons in fiscal year 2024-25 to 721.03 tons. The surge in import value primarily reflects the sharp rise in international gold prices.

India is the world's second-largest gold consumer, after China, with demand primarily driven by the jewelry industry. Since India relies heavily on imports for the vast majority of its gold, and transactions are settled in US dollars, each increase in gold demand translates into a larger outflow of US dollars, directly putting pressure on foreign exchange reserves and the rupee exchange rate.

Deeply rooted in culture, but the effectiveness of the policies remains questionable.

Gold holds profound cultural and financial significance in India, having long been a core asset for intergenerational family inheritance and closely linked to marriage customs and religious ceremonies. This is one reason why Modi's speech garnered widespread attention among the public.

However, the market remains skeptical about whether top-down public opinion persuasion can truly change consumer behavior rooted in cultural factors. After Modi first issued a similar appeal in May, leading jewelry stocks such as Titan and Kalyan Jewellers plummeted by over 9% to 10% in a single day, but the impact at that time was more of a short-term fluctuation in market sentiment. The relatively smaller decline in the jewelry sector this time may reflect a calmer market expectation regarding the substantial impact of the policy.

According to reports, the Indian government had previously discussed lowering import tariffs on gold and silver, as the previous high tariff policy was considered ineffective in curbing import growth.

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